In order to achieve energy security, reduce global warming and promote the vision of a common electricity market, the European Union (EU) is transforming the EU electricity grid from a large set of independent hierarchical national grids into one meshed EU-wide grid. For the first time in the history of the electric power industry, residential consumers are being integrated into the grid as active consumers and micro-generators of electricity. In the near future, residential buildings in the EU will have to use much less energy and the right source of energy. If residential consumers want to maintain the same level of energy service, buildings will have to use and produce energy differently. Decentralised energy production from renewable energy sources beside or within residential buildingsis required. Distribution grids will receive more locally produced energy and be more autonomous. Suppliers and distribution system operators will have to change business models from quantity-based to service-based. As residential consumers become more active in the EU, residential system developers need to understand what and how system requirements can support EU energy policy. This thesis therefore interprets EU energy policy concerns in terms of factors influencing the residential demand response system design. To test the viability of the influencing factors, system design was constructed and prototyped. One important influencing factor,the “greenness” of electricity information, was concretised as a dynamic CO2 signal and integrated into the system design as a residential demand response signal. The dynamic CO2 signal was not always correlated with the dynamic price of electricity, but there were strong indications that the CO2 intensity signal can and should be used as a supplement to the price signal in the residential demand response system to increase motivation for energy savings. It was found that a CO2 intensity-driven Time-of-Use tariff can be developed, based on forecasts of the hourly wholesale market price and the CO2 intensity, and that this tariff is beneficial for both supplier and household. The thesis thus demonstrates that it is possible to extract system design-influencing factors from EU energy policy and use these for the design and implementation of a residential demand response system.